If one surveys the UK loan market, there are as many diversified loan products available as there are lending institutions. There is no dearth of good loan deals, only of good judgement. It is normally observed that first time borrowers fall prey to the trap of lenders, who despite the good credit record of the borrower let them agree for a loan at a high APR. This is mostly in the case of unsecured loans. Though, on the surface level, unsecured deals may seem tempting. But, once you go in to the depth, you find that the borrower is many times at a great loss by choosing an unsecured personal loan over a secured one.
Secured loans are cheap loans when one takes the APR charged and other charges like agreement fees, brokerage charges, and early redemption penalties into account. Since there is low risk involved in the loan deal for the lender, he offers low APRs on secured loans. The loan deal is secured by assets like home offered by the debtor. It's the simple rule of thumb, lower the risk for the lender - lower the cost of loan for the borrower. With increasing debts and defaults on them, the rate of interest charged on unsecured loans by the lenders has increased considerably. Banks have become stringent in their credit policies as well regarding unsecured debts.
So, whenever there is choice between secured and unsecured loans, compare loans extensively. Secured loans may fetch you the following advantages that an unsecured might not.
Easier to obtain- You don't really have to “hunt" for lenders in case of secured loans. Owning a home in UK and willingness to pledge it as collateral is in itself a big enough invitation for varied loan quotes from lenders. The creditors may offer you cheap loans if you are a homeowner. So, procuring a secured personal loan is not such a daunting task as availing an unsecured loan.
Hefty amounts can be procured- You can raise huge funds from the equity available in your home. In case of unsecured loans, on the other hand, the loan amount approved is generally small. For major financial requirements, like buying another house, property, starting a new business, going for further studies, etc, secured loan is a viable solution.
Long loan tenure- It is always better to repay the hefty amounts in small installments over a prolonged period. Secured loans allow this freedom to the borrower. This makes the instalments easy to pay for the borrower. This feature is not there is the case of unsecured personal loans. So, compare loans on this parameter as well.
Flexible Repayment Options- Secured loans are not only cheap loans; they are flexible loans as well. Since the loan is secured by an asset, mostly home, by the borrower, he earns advantages like choice in the type of rate of interest charged (fixed, capped or variable), added benefits like deferred payments, repayment holidays, etc.
So, before availing any loan, compare loans to get cheap loans. After all, by availing a loan, you are incurring debts that have to be paid back. And, the more the flexibility of loan conditions, the more ease you'll find in making regular instalments.
